A blog to share my thoughts about trading, frugal living, money and the economy. Occasionally I might even throw in a few things about better living, technology, futurism, and science but these are always in some way related to finances or speculation.

My Photo
Location: Phoenixville, Pennsylvania, United States

"I have become all things to all men so that by all possible means I might save some."

Tuesday, September 26, 2006

Simple frugal living

I must admit, I almost got caught up in the consumerism culture that is so prevalent in America today. At first I didn't want to be like my parents, who have never bought a new car in their entire lives despite doing pretty well for themselves (read The Millionaire Next Door and you will get the picture). Today however I recognize the value of frugal living. My brief stint with consumerism is long gone. I have returned to my roots, the roots of my ancestors, and it feels right!

If you are "off-track" like I once was, you should know that the things you should be doing now to get on track to financial independence aren't temporary, they are life long changes. I could buy any car I want, but when I recently needed new transportation, I bought a $5500 used Toyota echo (private sale of course!) with 38,000 miles on it. It had nothing wrong with it, it gets 38+ MPG, has no timing belt to replace, and is very reliable and safe. I still shop at yard sales and thrift stores. I have no cable or satellite television (digital and High Definition content is broadcast FREE to a vast majority of the US population and yet I'm the only person I personally know that is taking advantage of this). I take advantage of excellent free resources such as the local libraries. This year I'm even planning on heating my house with free wood. I switched to a dirt cheap internet based phone service, and pay less than $9/month for my cell phone. I grow some of my own food, and even planted an orchard. My recurring monthly expenses are miniscule, my biggest bill is for property taxes.

Personally I think frugal living is FUN and it has it's rewards! I never inherited a dime, but I don't have to worry about losing my job, because I can live off the interest alone from my savings and investments. I paid cash for my house (incidentally, if you don't hold a title to something, you don't own it, that applies to cars and houses). The credit card companies pay ME (I'll explain this later, but I am currently making THOUSANDS of dollars a year in income from the credit card companies). I can travel anywhere in the world, stick it to da man, and do anything I want without worries. Great freedom comes from the frugal way of life.

Frugal living is a lifestyle choice. Are you going to take the path of everyone around you, or are you going to make a serious change? Are you prepared for any (often sudden and unpredictable) event that might come along in your life? Are you on a path to a satisfying retirement?

How can you get out of debt? SNL a few years back put it into shockingly simple terms: Don't Buy Stuff You Cannot Afford.

Here is a list of traits that describe the typical millionaire in America:

Who is the prototypical American millionaire? What would he tell you about himself?(*)

* About one in five of us is retired. About two-thirds of us who are working are self-employed. Interestingly, self-employed people make up less than 20 percent of the workers in America but account for two-thirds of the millionaires. Also, three out of four of us who are self-employed consider ourselves to be entrepreneurs. Most of the others are self-employed professionals, such as doctors and accountants.

* Many of the types of businesses we are in could be classified as dull/normal. We are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors.

* About half of our wives do not work outside the home. The number-one occupation for those wives who do work is teacher.

* Our household's total annual realized (taxable) income is $131,000 (median, or 50th percentile), while our average income is $247,000. Note that those of us who have incomes in the $500,000 to $999,999 category (8 percent) and the $1 million or more category (5 percent) skew the average upward.

* We have an average household net worth of $3.7 million. Of course, some of our cohorts have accumulated much more. Nearly 6 percent have a net worth of over $10 million. Again, these people skew our average upward. The typical (median, or 50th percentile) millionaire household has a net worth of $1.6 million.

* On average, our total annual realized income is less than 7 percent of our wealth. In other words, we live on less than 7 percent of our wealth.

* Most of us (97 percent) are homeowners. We live in homes currently valued at an average of $320,000. About half of us have occupied the same home for more than twenty years. Thus, we have enjoyed significant increases in the value of our homes.

* Most of us have never felt at a disadvantage because we did not receive any inheritance. About 80 percent of us are first-generation affluent.

* We live well below our means. We wear inexpensive suits and drive American-made cars. Only a minority of us drive the current-model-year automobile. Only a minority ever lease our motor vehicles.

* Most of our wives are planners and meticulous budgeters. In fact, only 18 percent of us disagreed with the statement "Charity begins at home." Most of us will tell you that our wives are a lot more conservative with money than we are.

* We have a "go-to-hell fund." In other words, we have accumulated enough wealth to live without working for ten or more years. Thus, those of us with a net worth of $1.6 million could live comfortably for more than twelve years. Actually, we could live longer than that, since we save at least 15 percent of our earned income.

* We have more than six and one-half times the level of wealth of our nonmillionaire neighbors, but, in our neighborhood, these nonmillionaires outnumber us better than three to one. Could it be that they have chosen to trade wealth for acquiring high-status material possessions?

* As a group, we are fairly well educated. Only about one in five are not college graduates. Many of us hold advanced degrees. Eighteen percent have master's degrees, 8 percent law degrees, 6 percent medical degrees, and 6 percent Ph.D.s.

* Only 17 percent of us or our spouses ever attended a private elementary or private high school. But 55 percent of our children are currently attending or have attended private schools.

* As a group, we believe that education is extremely important for ourselves, our children, and our grandchildren. We spend heavily for the educations of our offspring.

* About two-thirds of us work between forty-five and fifty-five hours per week.

* We are fastidious investors. On average, we invest nearly 20 percent of our household realized income each year. Most of us invest at least 15 percent. Seventy-nine percent of us have at least one account with a brokerage company. But we make our own investment decisions.

* We hold nearly 20 percent of our household's wealth in transaction securities such as publicly traded stocks and mutual funds. But we rarely sell our equity investments. We hold even more in our pension plans. On average, 21 percent of our household's wealth is in our private businesses.

* As a group, we feel that our daughters are financially handicapped in comparison to our sons. Men seem to make much more money even within the same occupational categories. That is why most of us would not hesitate to share some of our wealth with our daughters. Our sons, and men in general, have the deck of economic cards stacked in their favor. They should not need subsidies from their parents.

* What would be the ideal occupations for our sons and daughters? There are about 3.5 millionaire households like ours. Our numbers are growing much faster than the general population. Our kids should consider providing affluent people with some valuable service. Overall, our most trusted financial advisors are our accountants. Our attorneys are also very important. So we recommend accounting and law to our children. Tax advisors and estate-planning experts will be in big demand over the next fifteen years.

* I am a tightwad. That's one of the main reasons I completed a long questionnaire for a crispy $1 bill. Why else would I spend two or three hours being personally interviewed by these authors? They paid me $100, $200, or $250. Oh, they made me another offer--to donate in my name the money I earned for my interview to my favorite charity. But I told them, "I am my favorite charity."


Anonymous Anonymous said...

How is tv, cable and hd, broadcast free? Thanks

4:58 PM  
Blogger TraderGordo said...

You can only get the broadcast channels for free. I get CBS, NBC, ABC, WB & UPN (now CW and MNT), PBS, FOX, and a few others including two Spanish networks. I don't really care about any shows that are only on cable. For what its worth the free broadcasts are better quality than what you would otherwise get via cable or satellite - there is no extra compression on the video, and it supports Dolby Digital 5.1 audio. Some cable/satellite companies compress the signal which gives you lower quality, and they only do 2 channel audio instead of the full 5.1. This becomes especially noticeable with sports and movies, for example football with 5.1 has interesting crowd noises coming out of the side channel (surrounds) and commentary only from the front/center. Someone watching an NFL game at my house noticed this and asked why they don't have that at home even though they have 5.1 speaker setup (its because they get 2 channel audio from their cable company).

5:18 PM  
Anonymous Anonymous said...

how do you make money from credit cards, as mentioned in your blog ?

11:52 AM  
Blogger TraderGordo said...

OK - I will post a new article about how I make money from the credit card companies later today.

12:55 PM  

Post a Comment

<< Home